Question

monovimo) O mona 5. If over any given period, domestic investment Spending is greater than total domestic savings then, it will be reasonable to expect that a. Net exports will be zero. b. Net exports will be positive. c. Net exports will be negative, d. Net exports may be either positive or negative. 6. List all of the following that are included in the definition of money that is most relevant to analysis of Federal Reserve monetary policy, that is in "M1" and "M2 a. U.S. dollars currency held in a personal safe b. Canadian dollars held in a personal safe C Bars of gold held in a personal safe d. $1,000,000 checking account balances e. $100,000 certificates of deposit f. Money market fund shares held in investment portfolios B.U.S. Treasury securities held in investment portfolios 7. If, in the context of the Solow model of economic growth, investment spending in any short period of time is less than depreciation, then a. Savings will increase b. The capital labor ratio will decrease c. Aggregate output will rise d. The marginal product of capital will fall 8. In the context of the Romer model an exogenous increase in population a. Results in lower per-capita output permanently b. Results in lower per capita output initially, but increases the rate of per-capita output growth. c. Has no effect on per-capita output. d. Increases total output but has ambiguous impacts on long-term per-capita output. e increases per capita output immediately and permanently. 9. List all of the following that almost always accompany an economic contraction? a. An increase in interest rates. b. A decline in U.S. Treasury security yields relative to the yields on corporate obligations. C. An absolute decrease in consumer spending. d. An absolute decrease in investment spending. e. An increase in inflation.

Answer 1

5. B: Net exports will be positive since the investment will lead to overall increase in demand and production and hence higher productivity which will lead to better competitiveness of exports and increase in exports.

6. M1= Money in Checking deposits+ Currency = a) + d)

M2= M1 + SAVING DEPOSITS + TIME DEPOSITS = a) + d) +e)+f)+g)

7. d) : Marginal Product of Capital will fall

8. e) Increases per capita output

9. c) absolute decrease in consumer spending